OMSAN LOJİSTİK

Production and Operations ManagementProduction and Operations Management

1: Strategic Role of Operations1: Strategic Role of Operations

Top Management Program in Logistics & Supply Chain Management (TMPLSM)

OPERATIONSChain of Activities that Create, Produce, and Deliver Products and Services

Operations Are Made of Processes

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What is POM?

Outputs:•Goods•Services

Inputs:•Raw Materials•Labor•Capital•Technology•Energy•……

POM = design and management of production processes

ProductionProcesses

FIRM

There is a “process” behind everything we do

For External Customers

OperationalProcesses

For Internal Customers

AdministrativeProcesses

Often a little attention to these processes produces great benefits

A good starting question:Is the process aligned for maximizing value for the customer?

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Value for the customer

Design and managementof the process

The answer, in a surprising number of cases, is

“Not exactly!” 6

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More Questions? …

• What makes Customers to buy from you instead of the Competition?

– Cost

– Quality

– Service

– Flexibility

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Typical Performance Measuresfor Operations

• Cost (Efficiency)Cost per unit, Labor productivity, Capacity utilization, …

• QualityConformance to Specs, Rejects, Reworks, …

• Service (Dependability)Reliability of Delivery, Availability, Predictability, ….

• FlexibilitySpeed of delivery, Ability to customize, Min. order quantities, …

Of course in addition to Safety, Environmental, and other good housekeeping measures

• Cost (Efficiency)Cost per unit, Labor productivity, Capacity utilization, …

• QualityConformance to Specs, Rejects, Reworks, …

• Service (Dependability)Reliability of Delivery, Availability, Predictability, ….

• FlexibilitySpeed of delivery, Ability to customize, Min. order quantities, …

Of course in addition to Safety, Environmental, and other good housekeeping measures

Cost

Quality

ServiceFlexibility

What does the customer want from the process?

Differentiate between “qualifiers” and “order winners”

Value for customer

CostQualityTimeFlexibility

Process Design &Management

Always check, and re-check, the “fit”

Are “order winners” & “qualifiers” specified? (and updated?)

Is focus on maximizing the “order winners” and meeting acceptable levels for the qualifiers?

Looks simple—but it is not easy!

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Are Operational Processes Aligned for Different Market Segments?

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Operational Processes

Market Segments Served by the Business

Managerial Decisionsbehind these processes

Operational Processes

Acquire production capacities

Configure & improve the system

Schedule and deploy resources

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Acquire Capacities

• What? Facilities, equipment, people

• Ownership? Vertical integration

• How Much? For peak load? Average load?...

• When? Lead demand? Lag demand?...

• Where? Centralized or decentralized?...

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Configure & Improve

• Orientation? Job shop, batch, flow shop

• Work Organization? Functional, cellular,…

• Linkages upstream and downstream?

• Interface with R&D?

• Key Performance Indicators?

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Schedule & Deploy

• Flows, Inventories, and queues?

• Orders and Capacity Utilization?

• Continuous Improvement?Of cost efficiency, quality, flexibility,

reliability,…

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There is always

variability

in demand and supply

And that’s a big challenge in

management of operations

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The Business as a System

OPERATIONS ACT

FIN

MKT

OB

OperationsOperations& Logistics& Logistics

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Role: Production of Goods and Services

Role: Investigate Demandand establish distribution chain

Organization’s Top Management

Operations Marketing

CostsCosts

SchedulesSchedules

FlexibilityFlexibility

High QualityHigh Quality

PricePrice

Delivery PromiseDelivery Promise

Number of ModelsNumber of Models

Repeat SalesRepeat Sales

LINKS

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Producer’s View

MatlLabor$$$

INPUTS

Goods& Svcs

OUTPUTS

Operations

TRANSFORMINGPROCESSES

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Customer’s View

OrderEntryDEMAND

Del’y &Service

SUPPLY

LogisticsLINKINGPROCESSES

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OrderEntry

Del’y &Service

MatlLabor$$$

Goods& Svcs

Operations& Logistics

PPRROODDUUCCTTIIVVIITTYY

CostQuality

SERVICE LEVELSERVICE LEVEL

ServiceFlexibility

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Wilson Sporting Goods

96 million golf balls a year!!96 million golf balls a year!!

* Market share from 2% to 18%

* Plantwide productivity up 121%

* Cost: Total inventory reduced by 67% (Inventory turns from 6.5 to 85)

* Flexibility: orders from 1 dozen to 85,000 dozens

* Service: 99.9% on-time delivery, Normal lead time = 10 days

* Quality: scrap reduced 67% ($9.5 million in quality costs)

* Continuous Improvement, Associate Involvement, TQM, JIT, “Lowest Total Cost” Manufacturing

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Business Portfolio

HIGHLOW

MARKET ATTRACTIVENESS

DEVELOP ORWITHDRAW

INVEST / GROW

HARVEST/DIVEST

MAINTAIN / PROTECT

C O

M P

E T

I T

I V

E

P O

S I

T I

O N

STRONG

WEAK

Profit Pool ?

PossibleWin ?

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Marketing / Financial Framework

MARKET

POTENTIAL

MARKETPENETRATION

MARKET

SIZE

MARKET

SHARE

PRICE

COST

PROFIT

MARGIN

SALES

CAPACITY INVESTMENT

PROFITS

R.O.I.

I/G

D/W

M/P

H/D

BUSINESS / PROD.PORTFOLIO

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Growth Opportunity Matrix

OLD NEW

MARKETS

PRODUCTS

NEW

OLD

Diversification

MarketDevelopment

ProductDevelopment

PerformanceImprovement

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Elements of Operations Strategy

1. Workforce

2. Process Technology

3. Capacity

4. Production Planning and Control

5. Supply Chain

6. New Product & Process Development

7. Facilities

8. Organization

9. Performance Measures

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Job Shop to Flow Shop

Understand the differences between:

Job shop Batch flow Line flow Flow shop

Objective:

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Example: Car Wash

Queue 1 Queue 2AutomaticWash2.5 min / car

Interior Cleaning3 min / car

IN OUT

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Process Spectrum

JobShop

BatchFlow

Line Flow

Flow Shop

Jumbled flow

Disconnected line flow

Assembly line flow

Continuous flow

Groups similar equipment together. Jobs follow diverse paths

Groups similar equipment together. Batches provide some standardization.

Equipment placed in assembly sequence. Worker or machine paced flow.

Equipment in process sequence. Expensive equipment but high utilization rates.

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Types of Processes

JobShop

BatchFlow

Line Flow

Flow Shop

Volume

High

LowHighLow

Vari

ety

, #

of

pro

duct

s

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Job Shop vs Flow Shop

Job Shop: Production system designed for low volume manufacturing of highly customized products and services.

Flow Shop: Production systems that is designed for high-volume production of a standardized products.

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Job Shops Flow ShopsProducts

Equipment

Material Flows

Scheduling & Planning

Capacity Utilization

Inventories

Accounting

Information Flow

Direct Labor

Managerial Focus

Competitive Challenges

Varied

General purpose

Jumbled

Complex

Fluctuating

WIP

Job costing

Structured

Skilled

Supervision

Flexibility, response

Standard

Specialized

Linear

Simple

High

Negligent

Process costing

Simple

Less-skilled

Planning

Price, supply

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Types of Production Processes

Project Batch ProcessAssembly LineContinuous Flow

Job shop Flow shop

Increasing volumeIncreasing variety

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Product Spectrum

Volume

High

LowHighLow

Varie

ty, #

of p

rodu

cts Satellites

Apparel

Auto

Light bulbs

One-of-a kind product

Batches of distinctly different product

Variations on a theme

Standard product

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Product Life Cycle

DeclineIntroduction Growth Maturity

time

Demand

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JobShop

FlowShop

Product

Process

Product Life Cycle

Entry Growth Mature

X

X

X

High CustomizationLow Volume

High StandardizationHigh Volume

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Product Process Matrix

Competitive ModesM

anag

emen

t Tas

ks

Quoting and tracking jobs, shop floor control

Develop stds, Process dev.Inventory mgt.

Line balancing, Process dev. Personnel mgt.

Raise capital Run efficientlyMaterial mgt.

CustomDesignshi margin

Quality,Servicemargin

Std,Designsavailability

Vertical int.,Economies ofScale, cost

Satellites

Apparel

Auto

Light bulbs

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Tension within the matrix

JobShop

Flow Shop

Volume

Var

iety

, # o

f pr

oduc

ts

High

Low

HighLow

Flexibility

Cost efficiency

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Take-aways

• Each firm is a sequence of processes.

• Operational Performance measures:– Cost, flexibility, quality and service

• While designing the process, you face a trade-off between efficiency and flexibility.

• Need to match processes to competitive priorities